Your CPA firm (The Good Firm) represented George Rich for many years. As part of your representation of George, he provided you with access to all of his investment account and banking account information and the firm used that information to monitor his financial transactions and properly account for all of them in both a financial accounting and tax accounting mode. [Assume that somehow, your firm overlooked the transaction described below and that this is the first time it has come to anyones attention. Oops!]

George died on June 1, 2020. His Will has been admitted to probate and his good friend, John Law, has been appointed his independent executor. John has now retained your CPA firm to represent him as he administers Georges estate.

John called the other day asking a question about the proper tax basis in one of Georges assets, that being 1,000 shares of Pineapple Corp. common stock. He is more than a little confused by this asset. So, you pull out your copy of Georges Will, along with all of his financial records and begin your due diligence investigation into the asset,

In your investigation you discover the following:

1. On November 1, 2019, Georges investment account at Edward Jones shows a deposit into that account of 1,000 shares of the common stock of Pineapple Corp., a large high tech firm.

2. On that date, the fair market value of that stock was $1,000.00 per share for a total value of $1,000,000.00.

3. By a strange coincidence, on the date of Georges death, the fair market value of the stock was also $1,000,000.00. Even with this asset in Georges estate, he has no exposure to the federal estate tax system so you can ignore any estate tax related issues.

4. The statements from Edward Jones for that period, however, do not show any payment of $1,000,000 to purchase that stock. After reviewing all of Georges bank RESEARCH ASSIGNMENT NO. 2 - Page 1 statements for that time period, you do not find anything to suggest that he ever paid anyone for that stock.

5. So, you call up Amy French, Georges financial advisor at Edward Jones and ask her about the transaction. After obtaining Johns consent to discuss this matter with you, Amy tells you that on November 1, 2019, George showed up at her office with an old fashion paper stock certificate for 1,000 shares of Pineapple stock that was issued on January 3, 1980 with the owners name being Josh Rich. Along with the stock certificate, George had all of the paperwork necessary to effect the transfer of the stock over from Josh to George. Accordingly, she had the shares transferred over into Georges name and the stock was then deposited into Georges account with Edward Jones. Amy tells you that George offered no explanation to her as to the nature of the transaction between George and Josh other than to say it was a family matter.

6. You review your records and determine that Josh is Georges favorite nephew and that Josh is still alive. Your research also indicates that January 3, 1980 was the initial public offering date of Pineapple and that is sold that date for $1.00 per share.

7. You next review Georges Will and read that George has made a specific bequest to Josh of the 1,000 shares of Pineapple stock.

8. So, after having one of those Hmm, this is weird moments, you call up Josh and ask him how George paid him for the Pineapple stock. Josh is more than a little evasive about things but does admit that George did not pay him anything for the transfer of the Pineapple stock. He refuses to offer any other details about the nature of this transaction but, he too, asks you about his basis in the Pineapple stock he inherited from George. He also tells you that his CPA reviewed the transaction and that Josh then filed all of the appropriate returns to the IRS for this transaction and that any tax (of whatever kind) that might have been due as a result of the transaction were properly dealt with.

Your Task: With this information in hand and using only the various Internal Revenue Code sections 1014 and 1015 (dealing with basis). For this assignment, you can ignore any Treasury Regulations, IRS pronouncements and any judicial case law), write a memo to your files outlining your thoughts on what the proper tax basis for this 1,000 shares of Pineapple Corp. common stock will be in Joshs hands as the inheritor of the stock from George: A. Assuming that the original transfer from Josh to George was made on November 1, 2019; and then RESEARCH ASSIGNMENT NO. 2 - Page 2 B. Assuming the same facts as set out above but with the date of the original transfer from Josh to George having instead been made on November 1, 2017. [Does this different transfer date change the outcome?]